6 Reasons US Corn Prices Can Move Higher

US corn futures prices continue to be plagued by negative domestic demand fundamentals and accommodating global stocks. Corn’s massive managed money net position shrank by an incremental amount last week but the position remains a variable that needs to be monitored headed in planting season. Inside the global feed grain export market, the strength of the US dollar along with other origins setting the global FOB price (Brazil corn and Russia wheat) continues to make US corn and wheat the residual supplier to the world. Despite the negative performance of US listed corn and wheat futures, below are the leading variables that view can create upsides price risks. 

1. USDA’s Prospective Plantings report on 3/28/24. This official survey-based report from NASS is key for setting the initial supply side assumptions for MY 24/25 row crop acres. Currently, USDA’s WAOB is using a nonsurvey-based 91.0, -3.6 ma YoY, estimate for MY 24/25 corn acres. At HTS, our model output assumes 91.5- 92.20 ma acres for MY 24/25. Corn acre estimates from various analysts are arriving weekly and the range is wide. We have seen figures ranging from 89.75 to 93.25 ma. We see a corn acres print below 91.0 ma creating a bullish reaction in the futures market. We believe that an corn acres print over 92.0 ma as a bearish input for new and old crop futures

 2. The 4.5 mmt corn production difference between Brazil’s CONAB and the USDA. Using March data, CONAB (Brazil’s agricultural statistics agency) is 4.5 mmt below the USDA’s estimate. The difference is the second largest value going back to 2017 and one of the reasons that we see potential upside demand risks for US corn exports. It is noteworthy that despite the largest 7.22 mmt production gap between the CONAB and the USDA in 2017, the USDA did not structurally increase US exports for the MY 16/17 marketing year. We see a growing probability of quality and production complications in Brazil impacting the harvest and logistics which can provide price support to US futures

3. Logistical challenges in Argentina and Brazil. Almost every year agricultural exports in Argentina and Brazil encounter delays due to labor strikes or weather. 2024 is no exception, as Argentina’s stevedores have already protested President Milei’s labor polices. 

 4. US dryness. The current hydrological configuration and the expanding dryness in Iowa, Minnesota, Missouri, Kansas and south eastern Nebraska are slow moving production concerns that should be monitored (page 13). While a strong correlation between March drought conditions and final corn/soy yields is absent, NOAA’s long term seasonal forecast shows below trend precipitation in the WCB during June-July-August. If temperatures trend warmer, precipitation lower early season yield objectives can become pressured which can support July’24 and new crop futures prices 5. There is an entire crop ahead year in the US. With an entire crop year ahead there is ample time for domestic and global feed grain supply and demand issues to surface which can alter the market psychology and the price trajectory.

5. There is an entire crop ahead year in the US. With an entire crop year ahead there is ample time for domestic and global feed grain supply and demand issues to surface which can alter the market psychology and the price trajectory.

6. Managed money (MM) short position is at a record. Seasonally the MM component of the corn trade is the shortest in 10 years, and we believe vulnerable to short covering. We do not advocate positioning hedges around what the MM element of the financial trade “may do”. We feel that any combination of fundamental variable(s) listed above can structurally shift the bearish mentally can help inflict short covering and push futures prices higher.

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Contact Scott Strand

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